03/17/2009 08:00 AM House COMMUNITY & REGIONAL AFFAIRS

HB 150-POWER COST EQUALIZATION                                                                                                
                                                                                                                              
9:14:38 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HERRON announced  that the next order  of business would                                                               
be  HOUSE BILL  NO.  150, "An  Act  repealing certain  provisions                                                               
relating to  modifying the  factors that  apply to  calculate the                                                               
amount  of power  cost equalization;  providing for  an effective                                                               
date by  repealing the  effective date  of sec.  3, ch.  2, 4SSLA                                                               
2008; and providing for an effective date."                                                                                     
                                                                                                                                
9:15:07 AM                                                                                                                    
                                                                                                                                
BOB CHARLES,  Energy Coordinator, Association of  Village Council                                                               
Presidents,  noted  that he  provided  written  testimony to  the                                                               
committee  entitled "AVCP  Calista  Region's Energy  Costs."   He                                                               
informed  the committee  that  the  Calista region's  residential                                                               
heating oil and regular gasoline  prices have increased well over                                                               
100 percent  in the  last couple  of years.   In fact,  when home                                                               
heating fuel  was delivered in the  spring of 2008, the  cost had                                                               
risen to  $8.00 a gallon.   He pointed  out that he  provided the                                                               
committee  with a  table specifying  fuel  prices at  the end  of                                                               
February ranging  from $6.00-$8.00  per gallon.   As  2009 began,                                                               
electric utility rates  in the region were between  $.53 and $.65                                                               
per  kilowatt hour  (kWh).   Electric  bills in  the region  have                                                               
averaged  $342-$360 per  month prior  to power  cost equalization                                                               
(PCE).   With PCE,  the electric rates  are around  $.33-$.44 per                                                               
kWh and  the billings amount to  $176 to $200.   Usage has ranged                                                               
from  530  kWh   to  750  kWh  per  household.     Local  utility                                                               
administrators  have observed  that a  number of  households have                                                               
much lower  usages, in the  range of 200 kWh  to 400 kWh  and the                                                               
billings ranging from $120-$150 per  month.  The increases in the                                                               
rates  are  reflective of  the  higher  delivered fuel  costs  in                                                               
recent years,  he said.   The PCE  program has been  paramount in                                                               
helping  to   make  electric  rates  affordable.     He  recalled                                                               
testimony at a  prior hearing that Newtok had one  of the highest                                                               
rates prior to PCE with billings  around $150-$400.  The usage in                                                               
Newtok ranges from  300-400 kWh [per month].   Mr. Charles opined                                                               
that energy  costs account for  a large portion of  a household's                                                               
disposable  income, with  it  amounting to  60-70  percent.   The                                                               
aforementioned can primarily be attributed  to the price hikes in                                                               
the energy  costs.   Any further increases  in electric  rates or                                                               
fuel  costs   will  result  in  fuel   and  electricity  becoming                                                               
unaffordable.   He related that  recent energy  studies conducted                                                               
by Nuvista  Light and Power  2002 and 2004 have  illustrated that                                                               
lower income residents devote larger  amounts of their disposable                                                               
income to energy and use less.                                                                                                  
                                                                                                                                
MR.  CHARLES then  related  that the  unemployment  rates in  the                                                               
Bethel  and Wade  Hampton census  districts currently  range from                                                               
16.6-22.8.  However,  the jobless rate is a  more significant and                                                               
relevant indicator of  the economic condition in the  region.  In                                                               
the Bethel  and Wade Hampton  districts the jobless rate  is 38.5                                                               
percent and  43.3 percent,  respectively.   The median  income in                                                               
the Bethel census district is  about $45,200, which amounts to an                                                               
average  monthly income  of about  $2,700.   In the  Wade Hampton                                                               
census  district  the  median  income  is  about  $36,600,  which                                                               
amounts to  an average  monthly income in  the amount  of $1,750.                                                               
He  then noted  that  the  fish income  in  the [Kuskokwim]  area                                                               
doesn't provide much income for the  year.  In the Kuskokwim area                                                               
about 500,000  salmon were  caught, which  amounts to  about $1.5                                                               
million  and about  $3,200 per  permit holder.   He  reminded the                                                               
committee that  in 2007 there  wasn't much  of a fishery,  save a                                                               
couple of coho  fishing periods that provided  about $300,000 for                                                               
the entire  region.   The Yukon  didn't have  a summer  chum king                                                               
salmon  fishery, but  did  have  a fall  chum  coho fishery  that                                                               
caught 312,513 salmon by 444  permit holders.  The aforementioned                                                               
totaled about  $1.4 million  and broke down  to about  $3,000 per                                                               
permit  holder.   Comparing the  aforementioned  income to  fuel,                                                               
electric, and  food costs, one  can see that lower  income people                                                               
can't afford  many groceries  and have  to use  less energy.   He                                                               
opined that this is an  indicator that populations throughout the                                                               
region   are  very   vulnerable  to   increasing  energy   costs.                                                               
Moreover,  the region's  economy  is fragile  and susceptible  to                                                               
further  increases  to fuel  and  electric  rates.   Mr.  Charles                                                               
concluded by  relating support for  HB 150,  specifically keeping                                                               
the eligible cost rate at $1 and continuing the PCE program.                                                                    
                                                                                                                                
9:24:11 AM                                                                                                                    
                                                                                                                                
ERIN  HARRINGTON, Staff,  Representative  Alan Austerman,  Alaska                                                               
State Legislature, speaking  on behalf of the sponsor  of HB 150,                                                               
explained that the  purpose of HB 150 is to  perpetuate the $1.00                                                               
ceiling in order to reflect the  true cost of power generation in                                                               
Alaska.  With  the continuation of the ceiling,  the program will                                                               
continue  to  reflect  the  true costs  of  power  generation  in                                                               
Alaska.    By keeping  the  ceiling  at  $1.00, the  state  isn't                                                               
obligated  to  anything  during   times  of  low  energy  prices.                                                               
However, when prices  are high, the $1.00  ceiling provides power                                                               
cost  equity for  rural  communities that  haven't  been able  to                                                               
benefit  from  the  long-term  investments  in  power  generation                                                               
infrastructure in certain areas of the state.                                                                                   
                                                                                                                                
9:26:11 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER inquired  as to how much  power an average                                                               
household uses in rural Alaska as compared to urban Alaska.                                                                     
                                                                                                                                
MS. HARRINGTON explained  that PCE covers the first 500  kWh in a                                                               
residential area.   Typical power usage in rural  areas is around                                                               
500 kWh  per household,  but it's  a bit  higher for  urban areas                                                               
where the electrical usage is closer to 700 kWh.                                                                                
                                                                                                                                
9:27:13 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HERRON, upon determining no  one else wished to testify,                                                               
closed public testimony.                                                                                                        
                                                                                                                                
9:27:18 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  MUNOZ moved  to report  HB  150 out  of committee  with                                                               
individual  recommendations and  the  accompanying fiscal  notes.                                                               
There being no objection, it was so ordered.